AmTrav CEO Jeff Klee argues that consolidation, legacy tech and outdated thinking sacrifice the industry’s greater good. Travel buyers, he asserts, must demand more innovation from providers.
A few years ago Elon Musk and Warren Buffett had a pretty entertaining Twitter spat about moats – not the canal-around-the-castle kind, but the economic kind that companies figuratively build to make it difficult for competitors to gain traction. Musk got a lot of attention when he said, “Moats are lame,” arguing that in today’s world the only thing that mattered was innovation and even the most entrenched companies were doomed if they didn’t work feverishly to improve their products. Buffett disagreed and the two traded jabs for a while, briefly exciting the Twitterverse.
If it’s any comfort to Mr. Buffett, the corporate travel industry seems squarely in his corner. We love moats. We’re like the Venice of industries. Older players in our space try to use their scale and position to muscle out would-be competitors, as one would expect, but those are just the moats within the moats. There’s a whole outer ring of moats at the industry level – legacy technologies, closed networks, gated data and arcane processes – that make it difficult for corporate travel startups, even ones with really good products and ideas, to gain traction and break through.
If we start with the premise that there is still a lot that can be improved to make business travel better for travelers and their companies, we should all be on Team Musk, at least in theory. We should all want an industry teeming with fresh thinking and new approaches, where startups with their nimbleness compete with incumbents with their resources, continuously trying to one-up each other. In Musk’s world, unrelenting competition means products and services will keep getting better, with service providers adding increasingly more value, appealing to more customers, generating more revenue, attracting more capital and spurring even more innovation – a virtuous cycle where customers, providers and investors all win.
Instead, though, we find ourselves in a sort of Prisoner’s Dilemma, where companies act in ways that are individually rational but collectively stifling. In a particularly moaty investor presentation, American Express Global Business Travel recently talked about growing by acquiring competitors, exploiting “superior supplier economics” and building upon its “leadership in scale,” with hardly a word about innovation or new products. It’s hard to blame GBT. Protecting and consolidating market share has historically been a very successful strategy, even though if everyone were to pursue that strategy effectively it would clearly hold back the whole industry.
Travel management companies could help change that dynamic by being more open to partnering with startups that offer innovative new products. I hear from young founders all the time who lament TMC after TMC saying, “I love this, but I only want it if it’s free.”
I’ve been guilty of that, too, and that reluctance makes it harder for those trying to bring new ideas into the marketplace. And suppliers don’t help when they choose to confer huge competitive advantages in the form of favorable commercial terms to the least progressive incumbents – the ones most resistant to innovation and change.
But in the innovate versus consolidate debate, the customer voice matters more – by orders of magnitude. They are the judges and jury who can move the needle.
I may regret saying this (and there are exceptions, of course) but the travel buyer community has generally been too quiet, too patient, too forgiving and too accepting. When a TMC or online booking tool provider says, “That’s not possible”, buyers have been way too reluctant to call bullshit. They might instead reply, “It’s 2022. Just about anything should be possible.”
So this is my call to arms for the travel buyers: If you think we can do better, demand that we do. Challenge us. Rather than fighting us to charge less, push us to deliver more. When prospects want to negotiate down fees, I’m admittedly frustrated. But when they ask if we can build something that no one ever built before, I’m inspired. I wish there was more of that across the industry.
While no company would say they are against innovation, there are massively different definitions of what that means. What some tout as progress, others call window dressing. There is a legitimate debate about whether the tech platforms and economic models that run our industry need a fresh coat of paint or should be bulldozed to the ground. Buyers can vote with their feet by embracing startups or established players that push the envelope and raise the bar.
In business, bigger is better, but better is better, too. Blockbuster Video’s scale made it a powerhouse, but only until people decided they wanted a better way to watch movies.
Sure, in corporate travel Team Buffet has a lead right now, but newer service offerings are getting more compelling. I’d never bet against innovation over the long run although it doesn’t really matter what I think. When the dust next settles and the music stops for a second, the market will deliver its verdict. We’ll see then who still has a chair.